MS Eolas appeal begins

Round two, or possibly three

Microsoft began its appeal yesterday against a $565m judgment that it infringed on a patent held by Eolas, a University of California spin-off. The federal appeals court heard that the patent should not be valid because of prior art claims.

The so-called 906 patent, covers a method for opening third party applications - Flash or PDF, for example - within a browser. In 2003, jury in a district court ruled that Microsoft must pay Eolas $521m in license fees for infringing on the technology. This was later upped to $565m.

However, the district judge did not let the jury consider information about the prior art claims before returning its verdict. Judge Randall Rader of the Washington federal appeals court suggested yesterday that this was a mistake: "The point is that the district judge didn't even let this be considered as prior art", he said.

In August, the US Patent and Trademark Office (PTO) ruled that the Viola web browser, demonstrated a year before the patent was filed, did constitute prior art. However, the Eolas/UC legal team argues that Viola should not be considered as such because it wasn’t demonstrated on a computer hooked up to the internet. The lawyers also contend that Viola was abandoned by its creator, Pei Wei.

Microsoft argues that the ruling, if upheld, should only apply to US shipments of IE. This would mean the licence fees payable would drop to around $200m, but News.com reports that the judges in the case did not seem to be convinced by the argument.

The PTO has also agreed to re-examine the patent in full, at the behest of the World Wide Web Consortium, headed by Sir Tim Berners-Lee. Stephen Kunin, the USPTO's deputy commissioner for patent examination policy said that: “a substantial new question of patentability exists”.

If Microsoft loses its appeal and the patent is upheld, the implications for the web are enormous. The question is whether Microsoft, and other browser wirters, would rather pay licence fees to Eolas and UC, or would re-code IE to avoid the patented idea. If it plumps for the latter, the knock on effect could “break” hundreds of thousands of web pages.